Lebanon sees high chances of offshore discovery, reforms on track

Lebanon has high chances of making an offshore energy discovery once drilling gets underway from November or December and its second licensing round is receiving lots of interest, the minister of energy and water said on Wednesday.

Nada Boustani also said plans to reform the electricity sector, which bleeds state funds while inflicting daily power cuts on Lebanese, were on schedule and expressed hope a regulatory authority would be established soon.

“We are really working on this strategy for the electricity sector because we are aware of its importance for the whole country,” she told Reuters in an interview.

Boustani’s ministry is a focal point of government efforts to reform an economy struggling with one of the world’s heaviest public debt burdens and years of low economic growth.

Fixing the electricity sector is seen as a key measure of Beirut’s will to drive through long-stalled reforms. Donor states and institutions last year offered $11 billion in soft loans for investment, conditional on such reforms.

Lebanon hopes an offshore energy discovery would give a big boost to its economy in the coming years. The country is in the eastern Mediterranean region where a number of sub-sea gas fields in Israeli, Cypriot and Egyptian waters have been discovered since 2009.

Lebanon awarded its first offshore gas and oil exploration and production agreements in 2018 to a consortium of France’s Total , Italy’s Eni and Russia’s Novatek for two blocks.

“We have among the best companies worldwide working on it.

“Worldwide ... the average is to explore three wells before having a discovery,” Boustani said, citing guidance from Total.

“So if we have it from our first well, it would be amazing.” Drilling of the first well was expected to begin in November or early December and would take 55 days, she added.

The closing date for bids in the second licensing round is January 31, 2020. “We are seeing lots of interest,” she said from firms including Malaysia’s Petronas, BP, Russia’s Lukoil and Gazprom.

US diplomats had also expressed interest though American firms had yet to be in touch. 

Cutting losses, improving revenues   

The government approved a plan earlier this year to reform the electricity sector. It aims to provide Lebanon with uninterrupted supply and to eliminate the annual deficits wracked up by the state-owned power company.

Boustani said efforts to reduce losses through fixing bottlenecks in the grid were on schedule. So too were efforts to reduce “non-technical losses” such as power theft. A planned “smart grid” will include metres that prevent this.

The government’s goal of reducing losses from the grid to 25 percent by the end of 2019 from the previous 34 percent would be met and possibly exceeded, she said. Efforts to improve revenue collection were also ahead of target.

Tenders for bids to build and operate new power stations under public-private partnerships would hopefully be launched in September, Boustani said.

As power supply improves, allowing Lebanese to do away with expensive private generators, the plan includes an increase to the power tariff. Boustani hoped this would be possible in 2020.

Lebanon aims to be producing 30 percent of its energy from renewable sources by 2030, she added.

Boustani said the regulatory authority should be established as soon as possible. “For me it can be done tomorrow if everyone agrees,” she said.